Property & Casualty Insurance Exam (National Portion)Producers and AdjustersEasy
A property and casualty insurance producer is found to have intentionally misrepresented the terms of a policy to a client to secure a sale. This action is a violation of which ethical and legal standard?
- ARebating
- BMisrepresentation
- CDefamation
- DTwisting
Show answer & explanationAnswer & explanation
Correct answer: B. Misrepresentation
Misrepresentation is the act of making false statements or concealing material facts about an insurance policy or insurer to induce a client to purchase insurance.
Why the other options are wrong
- A. Rebating is offering a prospective insured a valuable consideration or inducement not specified in the policy.
- C. Defamation involves making false and malicious statements about an insurer or producer.
- D. Twisting involves inducing a policyholder to lapse or forfeit an existing policy to replace it with another, to the detriment of the policyholder.
Misrepresentation (Unfair Trade Practice)
Misrepresentation is an illegal practice where a producer makes false statements or conceals material facts about an insurance policy or insurer to induce a sale.
- Involves false statements or concealment.
- Aims to induce a policy purchase.
- Is an unfair trade practice.
- Can lead to license suspension/revocation.
Memory trick: Unfair practices are like bad apples, spoiling trust and breaking rules.